BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Isadore Hall, III
Chair
2015 - 2016 Regular
Bill No: AB 780 Hearing Date: 6/29/2015
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|Author: |Williams |
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|Version: |6/15/2015 Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Arthur Terzakis |
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SUBJECT: Alcoholic beverages: tied-house restrictions: on-sale
retailers advertising
DIGEST: This bill makes clarifying and conforming changes to
existing provisions of the Alcoholic Beverage Control (ABC) Act
relating to the listing of on-sale and off-sale retailers as a
thing of value in order to enable licensees to connect with each
other for normal commercial purposes.
ANALYSIS:
Existing law:
1)Establishes the Department of ABC and grants it exclusive
authority to administer the provisions of the ABC Act in
accordance with laws enacted by the Legislature.
2)Separates the alcoholic beverage industry into three component
parts, or tiers, (referred to as the "tied-house" law or
"three-tier" system), of manufacturer (including breweries,
wineries and distilleries), wholesaler, and retailer (both
on-sale and off-sale). The original policy rationale for this
body of law was to: (a) promote the state's interest in an
orderly market; (b) prohibit the vertical integration and
dominance by a single producer in the market place; (c)
prohibit commercial bribery and to protect the public from
predatory marketing practices; and, (d) discourage and/or
prevent the intemperate use of alcoholic beverages.
AB 780 (Williams) Page 2 of ?
Generally, other than exceptions granted by the Legislature,
the holder of one type of license is not permitted to do
business as another type of licensee within the three-tier
system.
3)Prohibits, in general, an alcohol manufacturer, wholesaler, or
any officer, director, or agent of any such person from
owning, directly, or indirectly, any interest in any on-sale
license, or from providing anything of value to retailers, be
it free goods, services, or advertising.
4)Provides that the listing of the names, addresses, telephone
numbers, email addresses, or Internet Web site addresses, of
two or more unaffiliated off-sale retailers selling beer,
wine, or distilled spirits and operating and licensed as bona
fide public eating places selling the beer, wine, or distilled
spirits produced, distributed, or imported by a nonretail
industry member in response to a direct inquiry from a
consumer, as specified, does not constitute a thing of value
or prohibited inducement to the listed off-sale retailer, if
specified conditions are met.
5)Includes similar provisions applicable to on-sale licensed
premises, except that those provisions also extend the
exception described in item #4 above to others forms of
"electronic" media.
6)Defines an on-sale license as authorizing the sale of all
types of alcoholic beverages: namely, beer, wine and distilled
spirits, for consumption on the premises (such as at a
restaurant or bar). An off-sale license authorizes the sale
of all types of alcoholic beverages for consumption off the
premises in original, sealed containers.
This bill:
1)Consolidates two similar tied-house exceptions (one pertaining
to on-sale retailers and the other to off-sale retailers)
which authorize the dissemination of information pertaining to
the retail availability of products by alcoholic beverage
producers, distributors or importers in response to direct
inquiries from consumers.
2)Eliminates the requirement that the dissemination of
information be in response to a direct inquiry from a
AB 780 (Williams) Page 3 of ?
consumer, thus broadening the exception.
3)Includes brandy manufacturers and rectifiers within the
definition of non-retail industry member.
4)Contains boiler plate language (legislative findings and
declarations) relative to the necessity of requiring a
separation between manufacturing interests, wholesale
interests, and retail interests in the production and
distribution of alcoholic beverages.
5)Makes other minor conforming changes.
Background
Tied-house laws. Tied-house refers to a practice in this
country prior to Prohibition and still occurring in England
today where a bar or public house, from whence comes the "house"
of tied house, is tied to the products of a particular
manufacturer, either because the manufacturer owns the house, or
the house is contractually obligated to carry only a particular
manufacturer's products. Existing tied-house laws generally
prohibit a manufacturer, importer or wholesaler from furnishing,
giving, or lending any money or other thing of value to any
person engaged in operating, owning, or maintaining any off-sale
or on-sale licensed retail premise. Existing law also provides
two separate tied-house exceptions (one pertaining to on-sale
retailers and the other to off-sale retailers) relative to the
listing of a licensed retailer as a thing of value or prohibited
inducement.
Purpose of AB 780. According to the author's office, this bill
is intended to provide small distillers, brewers, and wineries
with an additional tool to promote their businesses. The
author's office contends that social media is a free form of
advertisement to the public; therefore, it should not be subject
to the traditional notion of advertising as a "gift" under
current tied-house laws.
The author's office emphasizes that AB 780 will provide greater
flexibility and protect the ability of specified alcohol
interests to engage in social media communications with
consumers, while preserving the original intent of the
tied-house law of prohibiting gifts of advertisement from
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alcoholic beverage producers, distributors or importers.
Prior/Related Legislation
SB 327 (Hall, 2015) consolidates two similar tied-house
exceptions within the ABC Act which authorize the dissemination
of information pertaining to the retail availability of products
by alcoholic beverage producers, distributors or importers in
response to direct inquiries from consumers. (Pending in
Assembly policy committee)
AB 973 (Gray, 2015) consolidates two similar tied-house
exceptions within the ABC Act which authorize the dissemination
of information pertaining to the retail availability of products
by alcoholic beverage producers, distributors or importers in
response to direct inquiries from consumers. (Pending in Senate
Governmental Organization Committee)
AB 2349 (Nestande, Chapter 374, Statutes of 2012) provided that
the listing of names, addresses, telephone numbers, or email
addresses in other forms of electronic media do not constitute a
thing of value.
SB 1096 (Wiggins, Chapter 285, Statutes of 2010) revised the
direct inquiry provisions in the ABC Act pertaining to the
authority of producers, wholesalers and importers to respond to
consumer inquiries as to where their products may be found to
include any "electronic" inquiries from consumers.
SB 1423 (Chesbro, Chapter 205, Statutes of 2000) authorized
wineries and brandy manufacturers to advertise the name and
location of restaurants that sell their products.
SB 1233 (Chesbro, Chapter 666, Statutes of 1999) allowed for the
limited dissemination of information regarding the off-sale
availability of alcoholic beverages.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: No
SUPPORT:
Ascendant Spirits, Inc.
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California Craft Brewers Association
Family Winemakers of California
Wine Institute
OPPOSITION:
None received
ARGUMENTS IN SUPPORT: Proponents contend that this bill is a
"win-win-win for wineries, consumers, and retailers. It would
remove for wineries, other suppliers, and wholesalers the
awkwardness of only reacting to consumer inquiries. The
information would be able to be routinely posted on the
business' website or other forms of social media, which provides
easy access for interested consumers. This information could
drive business to retailers carrying the supplier's or
wholesaler's products."
Additionally, proponents argue that AB 780 "recognizes the
exponential progress in how consumers communicate and find
products on-line. It allows wineries to affirmatively
communicate where their wines are available without being asked.
This helps in a highly competitive marketplace where the sale
of non-California wine is projected to capture 43% of all sales
in the United States, according to a new Gomberg-Fredrickson
report."